Share Trading and

Share Investment

Rajeshri Bagale
What is Stock Market?
A Stock market or equity market is a public entity for the trading of company
stock (shares) and derivatives at an agreed price; these are security listed on
stock exchange.

There are 22 stock exchanges in India. But, two of them are biggest

BSE (Bombay Stock Exchange) – One of the oldest exchange in Asia

NSE (National Stock Exchange) – is the 9th largest stock exchange in the
world by market capitalization and largest in India by daily turnover and
number of trades.
Role of Stock Market
• Raising capital for business
• Mobilizing savings for investment
• Facilitating company growth
• Profit sharing
• Corporate governance
• Indicator of economy
Stock Vs Share
• ‘Stocks’ and ‘shares’ are basic terms

• Stocks are financial securities that represent part-ownership

in one or more companies.

• A share is the smallest denomination of a company’s stock.

So, each unit of stock is a share, and each share of stock is
equal to a piece of the company’s ownership.

Stock’ represents the holder’s part-ownership in one or several

companies. Meanwhile, ‘share’ refers to a single unit of
ownership in a company
 Share Trading & Share Investment
• It requires Demat Account & Trading Account

• Demat Account – holds the shares and securities in digital mode (it
stand for the De-Materialization, converting paper share into digital
share)
• Trading account – helps to buy and sell the shares in stock market &
shows the transaction carried out in stock market

• It helps to trade shares digitally

• SEBI has made it compulsory to open demat & trading account to

buy and sell shares

• Brokers and most of bank provides facility of opening Demat

account
 Share Trading & Share Investment
• Trading – is a method of holding stocks for a short period of time & making
profit by selling stocks. i.g For a day, a week or a month!

• While in Share investment, investors invest money for some years, decades
for even longer period

• Share Traders look at the price movement of stock & if prices goes higher,
they may sell stocks. It is the skill of timing the market

• While Share investing is a art of creating wealth by compounding interest

and dividend over the years by holding quality stocks

• Both Trading and investing involves risk. Trading – higher risk & higher
returns while investing – lower risk & lower returns
 Share Trading & Share Investment
• Daily market cycle affects on Trading and dose not affect much on investing
for a longer time

• Trading is skill while Investing is an art

• Trading is related to the psychology of market while investing is related to

the philosophy of that runs the business

• Traders put money in share trading for short time. They buy & sell fast to
hit higher profits. Missing timing may lead to loss

• While investors, keep themselves way from trend and invest in value &
keeping eye on stocks they hold
 Trader (Buy and Sell)
A trader is of an impatient personality (Hare)  An investor is slow and steady in approach ( tortoise)
Trader takes decisions within minutes, days, weeks,
months 
Times the market ; missing the right time to enter or
exit may lead to loss 
Stocks selection strategy based on technical analysis;
momentum trading 
Requires real-time data and information to take buy
and sell calls hence is on his toes all the time 
Does not pay attention to what the company does
and only focusses on the scrip price and trade
volume. 
Has more risk appetite with a penchant for short
term gains
Is more likely to buy stocks based on
recommendations by friends , other stock market
traders, media and other external resources
Investor ( Buy and Hold)  
 
Decisions are based on long term consequences hence range
from years to decades. 
Do not time the market or get bothered by short term
market volatility. 
Stock selection strategy based on fundamental analysis of a
business ; value investing 
Is of a more relaxed disposition, information only regarding
fundamentals needed.
Bases all decisions on the conviction he has on the
company’s growth prospects 
Possesses lesser risk appetite comparatively, invests for the
long haul
Invests only when his investment objective aligns with a
business. Does his own research, and invests only after he
completely convinces himself of the potential of a business. 
 Due Diligence to be done

 Underlying factors that affect a company’s actual business and its future prospects.

 Questions to ask before investing include -

Is the company
Is the company’s Is the company able
actually making a
revenue increasing? to repay it’s debts?
profit?

Is the company in a
position strong enough to
compete with its peers?

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 How to do Due Diligence?
Review:
- Data related to current economic environment affecting company’s growth and stock
price.
- Company’s financial health : examining cash flow statement, income statement and
balance sheet for at least past 2 years.
- Latest price and volume, historical data, corporate announcement, etc.
- P/E ratio and intrinsic value of the share

Understand: Compare:
- Business model of the company with - Target Company and its competitors to
respect to future growth understand the worth of the Target
Company.

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 Important factors and metrics for Due Diligence
 Reputation of Promoters & Shareholding / pledged shares of the Company.

 Scope/Growth/Competition/Profitability/Structure of Industry of the Company.

 Financials of the Company viz. Earnings per Share (EPS), Price to Earnings Ratio (P/E),
Book Value, etc.

 Cash Flows from operations.

 Past Growth track record of sales turnover & profitability.

 Dividends paid by company in last 5 years.

 Debt of the Company.

 Corporate Governance Track record.

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How to Place
Orders?

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 Place Order: Modes

 Visit to broker’s Office

 Trade via Phone Call

 Through an email to Stock Broker

 By using Stock broker’s website / app on mobile (Online)

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 Place Order : Visit to Broker’s Office (1/2)
 Check whether the Stock Broker Offers facility to trading by visit to Stock
Broker’s Office.

 Need to select Offline Mode of trading in the Account Opening Form.

 On opening a new Account, Stock brokers provide a Welcome Kit to every new
investor.

 Contents of Welcome Kit :

- UCC (Unique Client code).
- Dealing office address.
- Designated Email id and phone number of Stock broker.
- Timings for placing orders.
- Brokerage / Service Charges (For online & offline trades).
- Details of Relationship Manager (if any).
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 Place Order : Visit to Broker’s Office (2/2)
Steps for Trading by visit to Stock Broker’s Office

Visit the Designated Branch of the Stock broker and make an entry in the visitor’s
register at the premises of the Stock Broker.

Get quote for the scrip you want to trade on.

Mention scrip, price, quantity, type of order you want to place, the exchange on
which you want to execute, while placing order to the Stock broker.

Provide proof of placement of order to the Trading Member.

Verify trades at the end of the trading session.

Trades are subject to payment of Margins (Explained in later slides).

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 Place Order : By Phone “Call & Trade”
 Check whether Stock Broker offers facility to trade via Phone Call. All phone calls for
placing orders with dealers are recorded.
Steps for Trading by Phone Call
Call the phone number given by the Stock Broker for placing of Orders from the Mobile number registered with the Stock
broker

Call should connect to the “Call & Trade” facility desk of the Stock Broker

Confirm identity details – Name, Date of birth, PAN number etc

Place your Order – Scrip details, Quantity, Type of order etc

Trading account will be updated on successful execution of the order.

Trades are subject to payment of Margins (Explained in later slides)

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 Place Order : By Email
 Check whether Stock Broker offers facility to trade via Email. All phone calls for
placing orders with dealers are recorded.

Steps for Trading by Email

Trades are
Send Email with Email must be
Select “Email subject to
details of trade – sent from the
based trading” in payment of
name of scrip, same email ID as
the Account Margins
Price, Order Type, provided in the
Opening Form. (Explained in
Quantity, etc. KYC form
later slides)

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 Place Order : Online (Website/ App)
Steps for Trading Online

Link your Trading, Demat and Bank Account.

Sign the IBT (Internet based trading) agreement after checking the costs involved and the facilities provided.

Visit website of the Stockbroker / Install the Online Trading app.

Investor must login using Username and Password provided.

Some Stock Brokers also have 2-Factor verification system where additional OTP also needs to be entered.

Check current price and volume details of stock you want to buy/ sell on Market Watch Section of the Stock
broker’s terminal.

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Thank You

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